Companies, Partnerships, Trusts, Shipping and Aircraft Operations in Bermuda

Transcription

1 Companies, Partnerships, Trusts, Shipping and Aircraft Operations in Bermuda

2 Preface This publication has been prepared for the assistance of those who are considering the establishment of companies, trusts or partnerships in Bermuda. In addition, there is a brief discussion of the ownership and registration of ships and aircraft in Bermuda. We do not attempt to cover these subjects in detail but rather aim to deal in broad terms with the matters of significance. Before proceeding with any matter discussed herein, persons are advised to consult with their legal, tax and other professional advisers in their respective jurisdictions. Conyers Dill & Pearman Page 2 of 28

3 TABLE OF CONTENTS 1. COMPANIES 1.1 Introduction 1.2 Incorporation of Exempted Companies 1.3 Uses of Exempted Companies Investment Holding Company Trading Company Insurance Company Mutual Fund Company Special Purpose Vehicles Manufacturing in Bermuda 1.4 Permit Companies 2. PARTNERSHIPS 2.1 Introduction 2.2 Exempted General Partnerships 2.3 Exempted Limited Partnerships 3. TRUSTS 3.1 Trusts and Settlements 3.2 Unit Trusts 3.3 Pension Trust Funds 4. SHIPPING AND AIRCRAFT 4.1 Ownership of Ships 4.2 Registration of Ships in Bermuda 4.3 Aircraft Page 3 of 28

4 5. GENERAL 5.1 Taxes 5.2 Registration Fees 5.3 Stamp Duty 5.4 Miscellaneous Fees 5.5 Exchange Control 5.6 Banking 5.7 Accountants and Auditors 5.8 Work Permits Page 4 of 28

5 1. COMPANIES 1.1 Introduction The laws of Bermuda contain certain provisions which permit those who are not Bermudians, whether or not they are residents in Bermuda or British subjects, to operate their business from administrative offices in Bermuda provided that trading transactions are not carried on with any person, firm or company in Bermuda. Companies which are incorporated in Bermuda with general powers to do business or trade locally in Bermuda are required by statute to be at least 60% beneficially owned by Bermudians. Bermuda companies which are incorporated for international business purposes are specifically exempted from this percentage ownership provision and are known as exempted companies. Only in certain very limited circumstances will a permit be issued for an exempted company or a foreign company to carry on business in Bermuda. 1.2 Incorporation of Exempted Companies An exempted company is incorporated by registration under the provisions of the Companies Act Firstly, an application is submitted to the Bermuda Monetary Authority (the BMA ). If satisfied, the BMA will issue a Consent to Incorporate. Incorporation then proceeds by the filing with the Registrar of Companies of the memorandum of association. In special circumstances, a company may be incorporated by petition to the Bermuda Legislature for a Private Act of Parliament. Prior to its presentation, the petition for the company must be advertised in the local newspaper on one occasion. This method of incorporation is now only used for companies requiring special powers or abilities. The total time involved will normally be about three months but this depends on the sittings of the Legislature. With some exceptions, the BMA requires that each of the ultimate beneficial owners holding 10% or more of the shares of the proposed company sign a declaration and provide a certified copy of their passport or other official identification. By the Page 5 of 28

6 declaration, each beneficial owner attests to his or her good standing in any other Bermuda operations and generally. The ultimate beneficial owners identity must in all instances be disclosed. The Companies Act provides four types of company each having different constitutional characteristics, as follows: Company Limited by Shares: The liability of the company s members will be limited by the memorandum to the amount, if any, that remains unpaid on the shares held by them. This is the most common form of company. Company Limited by Guarantee: The liability of the company s members will be limited by the memorandum to an amount as the members may undertake to contribute to the company s assets in the event of it being wound up. These companies are used for charitable or social purposes and do not pay dividends. Unlimited Liability Company: The liability of the company s members will be unlimited. While the company has all the usual characteristics of a company (such as a board of directors, etc.) it has the partnership characteristic of unlimited liability. Limited Duration Company: This type of company will have a fixed duration and will automatically dissolve on the expiration of a period or upon the occurrence of a specific event, as stated in the memorandum of association. The event may be a simple event (such as a fixed date) or a complex event (such as the death of a shareholder but subject to an extension or confirmation procedure). The memorandum of association may provide that the objects of the company are unrestricted, or it may set out the specific objects of the company. The objects clause may be restricted to permit only certain kinds of transactions or to permit only a single transaction if required. Page 6 of 28

7 A Bermuda company has the capacity, rights, powers and privileges of a natural person, subject to any specific provisions in its memorandum of association. The memorandum of association must set out the authorised share capital of the company. There is no statutory minimum (save for insurance companies). The authorised share capital may subsequently be increased by resolution of the company in general meeting. Each member is liable to the company for any balance unpaid on his shares either when called or on a winding up. The share capital can be paid for in part or in whole by the transfer of securities, patents, inventions or any other type of asset acceptable to the company. Bearer shares are not permitted although shares may be registered in the name of a nominee. Provision may be included in the company s memorandum of association and bye laws for the redemption or repurchase of shares. A Bermuda company must have a registered office in Bermuda, the address of which is registered with the Registrar of Companies. In general, the share register, register of directors and officers and records of the company must be kept at the registered office. In addition, the company must keep proper records of account, for a period of five years from the date on which they were prepared, with respect to its business activities at the registered office or at such other place as the directors think fit. Each Bermuda exempted company is required to have at least one director and a secretary. A secretary of an exempted company may be an individual or a company. A director of an exempted company may be an individual or any type of legal person (including any company or association or body of persons, whether corporate or unincorporate). For practical reasons, it is most common for the office of director to be filled by an individual or a company. Page 7 of 28

8 To satisfy the residency requirement contained in the Companies Act, the secretary or at least one director must be ordinarily resident in Bermuda. A company may satisfy the residency requirement by appointing either an individual or a company to act as its resident representative in Bermuda. Where the registered office is maintained by a law firm in Bermuda, arrangements can usually be made by that firm for the appointment of the Bermuda director, the holding of directors meetings and the provision of a secretary who will keep the statutory records. Bermuda law does not oblige a company to declare dividends; profits of the company may be accumulated and used for the purposes of the company. There is no requirement for the filing of accounts of an exempted company with the Registrar of Companies or any other authority in Bermuda. A Bermuda company may have a sole director or a full board, as desired. The management of a Bermuda company is the responsibility of its directors. The directors transact business at meetings of the directors. Notice of all meetings must be given to all directors although only a quorum of the directors need be present in order for business to be validly transacted. Notice may be given by telephone, electronic record or otherwise. A company is required to hold an annual general meeting in each calendar year (unless that requirement is waived by resolution of the members as described below). A shareholder may appoint any person as proxy to attend general meetings of the company. Bermuda law does not require that the meetings of the directors or members take place in Bermuda. The requirement to hold annual general meetings can be waived by resolution of the members for a specified year or number of years, or indefinitely. Where the requirement to hold annual general meetings has been waived, any member can serve notice on the company requiring that annual general meetings be reinstated. Page 8 of 28

9 1.3 Uses of Exempted Companies Exempted companies may be formed for a variety of purposes, some of which are described below. The financial and other advantages to be gained from the use of a company in Bermuda must of course be considered in relation to the country of residence of the shareholders and the location of any investments. Legal and financial advice should be sought in such country and location. A Bermuda company may establish a branch office outside Bermuda, subject, of course, to the laws of the place where it is proposed that such branch office be established. Bank accounts may be opened at banks outside Bermuda for the purposes of the company. In addition, officers of the company may be located outside Bermuda and have delegated authority to carry out certain business transactions on behalf of the company. It should be noted that permission will not be given for the incorporation of an exempted company to carry on banking business Investment Holding Company An exempted company may hold property and securities of any kind without restriction, except shares of a locally owned Bermuda company Trading Company A Bermuda company may be incorporated to carry on a wide range of trading activities outside Bermuda Insurance Company Any person carrying on insurance business will be subject to the Insurance Act 1978 (as amended) and its regulations. Page 9 of 28

10 The Insurance Act applies to local, exempted and permit companies carrying on insurance business in or from Bermuda and its fundamental purpose is to protect the public interest without an overly burdensome regulatory mechanism. The Insurance Act makes no attempt to restrict the nature of the risks undertaken by an insurer although the BMA may impose conditions relating to the writing of certain types of business at the time of application to register. Application for approval to register under the Insurance Act is made concurrently with the application to incorporate. The applicant must give details of matters such as the type of insurance business, reinsurance arrangements, estimated gross and net premiums and projected financial statements for five years. The Insurance Act distinguishes between long term business and general business. Long term business consists of life, annuity, accident and disability contracts in effect for not less than five years and certain other types of contracts. General business is any insurance business which is not long term business. General business insurers fall into one of four classes, depending on the nature of the risks underwritten and the relationship of such risks to the owners of the Bermuda insurer or reinsurer. Each class is subject to its own minimum share capital, solvency and other regulations. Every insurer must appoint a Principal Representative in Bermuda (usually a Bermuda based insurance management company) and maintain a principal office in Bermuda. An insurance company may contract out its underwriting and insurance management to one of the independent management companies that have been established in Bermuda with staff qualified in those fields. The Insurance Act and its regulations impose certain minimum solvency and liquidity standards and auditing and reporting requirements on insurance companies and grants to the BMA powers to supervise, investigate and intervene in the affairs of insurance companies. Page 10 of 28

11 1.3.4 Mutual Fund Company A mutual fund company is a company incorporated for the purpose of investing the monies of its members for their mutual benefit. In addition, shareholders of a mutual fund company have the power to redeem their shares at a price determined by reference to the net asset value of the shares. The BMA has imposed certain requirements in connection with the establishment and operation of mutual funds. The requirements are primarily set out in the Investment Funds Act 2006 (the IFA ). The purpose of the IFA is to establish standards and criteria applicable to the establishment and operation of investment funds, including mutual fund companies, in Bermuda with a view to protecting the interest of investors. The BMA must be satisfied as to the investment management experience of the promoters of the mutual fund. In addition, the BMA will generally require a prospectus or explanatory memorandum to be submitted along with the application to incorporate unless the company s shares are already listed on an appointed stock exchange (which includes most of the world s major exchanges) or accepted by a competent regulatory authority (which includes the U.S. Securities and Exchange Commission). Investment funds that are private funds and closed ended funds are excluded from the scope of the Act. A fund is a private fund if the number of participants in the fund is not more than 20 and the fund does not promote itself to the public generally. However, as soon as practicable after establishment, written notice of the fact that the private fund qualifies for such exclusion must be provided to the BMA by the operator which is defined to mean the company in relation to a mutual fund company, the trustee in relation to a unit trust and the general partner in relation to a partnership. Unless exempted, mutual funds will be classified under the IFA in one of the following categories: Institutional fund a fund that accepts investments exclusively from qualified participants essentially, high net worth and sophisticated investors and Page 11 of 28

12 institutions or requires each participant to invest a minimum of $100,000 in the fund. An institutional fund must also have an officer, trustee or representative resident in Bermuda who has access to the books and records of the investment fund. Administered fund a fund may also be established by appointing a fund administrator who is licensed under the Act and such fund may be registered as an administered fund provided that it also requires a minimum initial investment amount of at least $50,000 or it is listed on a stock exchange recognized by the BMA for this purpose. Standard fund a fund qualifies for classification as a standard fund if it does not fall within any other class of fund. The BMA will, in general, grant permission for the free issue, transfer and redemption of the shares of a mutual fund company to, between or by persons regarded as resident outside Bermuda for exchange control purposes. Certain funds may apply to be exempted from the IFA (and would thereby bring themselves out of scope of the Swiss home country rules under the European Union Directive on Taxation of Savings Income (the EU Directive )). A fund qualifies for exemption if (i) it is open only to qualified investors; (ii) its fund administrator falls in a class recognised by the BMA; (iii) it has appointed an auditor; and (iv) it has an office, trustee or resident representative in Bermuda who has access to the books and records of the scheme. It is beyond the scope of this publication to detail the particulars of the IFA or the EU Directive, but it should be noted that most hedge funds will likely qualify for an exemption Special Purpose Vehicles (SPVs) Bermuda exempted companies are commonly incorporated as SPVs in order to play a particular role within a financing or leasing transaction. The rationale for introducing Page 12 of 28

13 the SPV into the structure will depend on the financing and leasing regulations in the jurisdictions of the participant airlines, lessors or sub lessors and therefore the SPV s role in each structure will be tailored to fit the particular transaction. The Companies Act allows companies to be incorporated for a specified duration and automatically be dissolved on the expiry of a specified period or on the happening of a specified event, as stated in its memorandum of association. Such vehicles are of particular use in transactions where joint venture participants wish to establish an entity which would be treated by one participant for accounting purposes as a partnership and by the other for accounting purposes as a company Manufacturing in Bermuda Limited facilities exist in Bermuda for the establishment of light industry. Ireland Island, at the western end of Bermuda, has been designated by the Government as a Freeport. Some buildings are available for the use of manufacturing enterprises and some unskilled labour is also available. The permission of the Ministry of Home Affairs can usually be obtained to import necessary skilled management and labour if it is not available locally. An exempted company can manufacture components and export them free of duty. It is also possible to establish such manufacturing enterprises elsewhere in Bermuda and similar facilities as those available in the Freeport can sometimes be obtained by the grant of a customs duty remission order. Such order would exempt the company from customs duties on the importation of the necessary raw materials and subsequent export of manufactured goods. 1.4 Permit Companies The law of Bermuda enables a body corporate, incorporated outside of Bermuda, to apply for a permit to establish a place of business in Bermuda. The grant of such a permit enables the company to become resident in Bermuda to the same extent as, and in a similar manner to, an exempted company. The government limits the grant of such permits and it must be satisfied that a Bermuda exempted company cannot Page 13 of 28

14 adequately perform the same function as the permit company for which application is made. By way of example, permits are generally granted for Panamanian and Liberian ship owning companies. As is the case for exempted companies, the BMA requires information on the ultimate beneficial owners holding 5% or more of the permit company. A permit company will be required to pay an annual registration fee in Bermuda. In the case of permit companies carrying on insurance business, such companies will be subject to the Insurance Act and be required to pay the appropriate license fees. A permit company carrying on mutual fund business will be subject to the BMA requirements discussed above. A permit company may have a principal representative in Bermuda, whose name must be entered with other details in a public register and such a company must maintain records in Bermuda of its dealings in Bermuda. 2. PARTNERSHIPS 2.1 Introduction The partnership is a popular vehicle for international ventures primarily because it is regarded in most jurisdictions (including the U.S. and the U.K.) as fiscally transparent. As a general principle, tax is imposed at the partner level, not at the partnership level, and consequently the tax position of one partner does not affect the position of the other partners. The principal statutes governing the formation and operation of Bermuda partnerships are: The Partnership Act, 1902 (as amended) (the Partnership Act ); The Limited Partnership Act, 1883 (as amended) (the Limited Partnership Act ); and Page 14 of 28

15 The Exempted Partnerships Act, 1992 (as amended) (the Exempted Partnerships Act ). In addition, overseas partnerships may apply for a permit to carry on certain trades or businesses in Bermuda under the Overseas Partnerships Act, 1995 (as amended) (the OPA ). An exempted or limited partnership may elect to assume a separate legal personality. In the absence of such election, the partnership is not a legal entity with any degree of legal personality, but merely a relationship between the partners. Even if the election to take on a separate legal personality is not made, under Bermuda law a partnership may function for practical purposes as an entity. The rules of court permit a partnership to sue and be sued in its partnership name. Sections 5 and 6 of the Partnership Act and the laws of agency empower the partnership to carry on business in its partnership name. Bermuda partnership law tends to follow English principles. The Partnership Act substantially codified common law on partnerships, but provides that existing rules of equity and of common law shall continue in force except so far as they are inconsistent with the express provisions of the Partnership Act. The Partnership Act generally deals with the nature of partnerships, relations of partners to persons dealing with them and relations of partners to one another. The Partnership Act provides that a partnership is the relation which subsists between persons carrying on a business in common with a view to profit. Upon formation, a certificate of exempted partnership must be registered with the Registrar of Companies. The certificate is a matter of public record and must state, amongst other things, the names of the general partners, the address of a registered office in Bermuda, and whether or not the partnership elects to have separate legal personality. An exempted partnership must maintain a registered office in Bermuda, the address of which is registered with the Registrar of Companies. Proper records of account, including records of account with respect to its assets, liabilities and capital, cash Page 15 of 28

16 receipts and disbursements, purchases and sales; and income costs and expenses, must be maintained at the registered office and the principal place of business of the partnership. The records of account are open to inspection by the partners and must be kept for a period of five years from the date on which they were prepared. The partnership agreement is not available to public inspection. An exempted partnership must appoint a resident representative in Bermuda. Unless agreed in writing by all of the partners, an exempted partnership must prepare audited financial statements. 2.2 Exempted General Partnerships The Partnership Act, 1902 regulates generally the constitution and operation of partnerships. Generally speaking, a partnership agreement can freely regulate the affairs of the partners as between themselves, the Partnership Act only applying where the partnership agreement is silent. However, as distinguished from companies, the liability of existing partners is joint for all debts and obligations of the partnership. The partners will suffer joint and several liability in matters concerning torts or frauds by the partnership or any partner acting in the name of the partnership. Partners may be individuals, companies, or other partnerships. 2.3 Exempted Limited Partnerships Limited partnerships may be formed in accordance with the provisions of the Limited Partnership Act, Limited partnerships to which the Investment Funds Act 2006 apply typically where limited partners are entitled to have their interest redeemed must apply for authorisation or exemption under that Act. A limited partnership must have at least one general partner and one limited partner. The name of a limited partnership must include the words Limited Partnership (or L.P. ) and must otherwise be acceptable to the Registrar of Companies. Page 16 of 28

17 The liability of general partners will be unlimited to the same extent as in the case of general partnerships. However, subject to what is mentioned below, the liability of the limited partners may be limited to the capital which each limited partner has contributed or agreed to contribute. A limited partner may not transact business or sign on behalf of the partnership and may not in any way bind the partnership. Any limited partner acting in contravention of this restriction will be deemed a general partner. A limited partnership must file a certificate of limited partnership with the Registrar of Companies. 3. TRUSTS 3.1 Trusts and Settlements A Bermuda trust or settlement may be revocable or irrevocable and may be created for any period which does not infringe the common law rule against perpetuities or for a stated term which does not exceed 100 years. Accumulation of income is permitted for the same period. Trusts are created for a variety of reasons, such as to secure succession to members of a family or to preserve and increase capital for family or business reasons. One of the chief advantages is that actual legal ownership of the funds or other assets is vested in trustees resident in Bermuda and not in the names of the beneficiaries who may be subject to the laws of another country. The interests of the beneficiaries of the trust may be either fixed or discretionary, the latter being the more common. Trustees may be private individuals or corporate bodies. In either case, their powers and duties are governed by legislation, as are the method of application to the court in matters relating to trust property and the appointment of new trustees; the investment powers; the indemnification of trustees and such other matters incidental to the administration of trusts. Page 17 of 28

18 The Trust (Regulation of Trust Business) Act 2001 grants additional regulatory and information gathering powers to the BMA. Under this act, a licence is required for anyone to carry on trust business. This applies to both trust companies and to individual professional trustees. There is an exemption from the licence requirement for those trustees who conduct minimal business with the public. The trust instrument itself is also central to the methods by which the trust is to be administered. It is usual to specify, in the instrument creating the trust, the types of investment in which the settlor or testator wishes the assets of the trust to be invested. This will normally include all investments which an individual could make. The investment policy can be directed by financial advisers outside Bermuda who can be named in the trust instrument, if required. If there is no general investment authorisation, or if the instrument authorises investment only in trustee investments, then the trustee is limited to those investments allowed by law for the investment of trust funds. The BMA has broad powers to request and obtain information to ensure compliance with the provisions of the Trust (Regulation of Trust Business) Act The Act prohibits any disclosure of information on settlors or beneficiaries by the BMA or its agents. The information disclosure provisions of the Act are designed for the purpose of supervising the trust service providers, and not the trusts themselves. A trust instrument in respect of non Bermuda property or exempted company shares will not be subject to stamp duty in Bermuda. 3.2 Unit Trusts Unit trusts established in Bermuda will be subject to the BMA requirements discussed above in connection with mutual fund companies. The trust deed pursuant to which the unit trust is constituted will contain provisions dealing with the determination of net asset value and the terms upon which units will Page 18 of 28

19 be issued and redeemed. In addition, it will usually contain provision for the holding of meetings of unit holders and all other matters incidental to the administration of the unit trust. No annual government fee is payable by the unit trust although the management company will be required to pay an annual fee in respect of each unit trust under its management. 3.3 Pension Trust Funds Trusts may be established in Bermuda with the object of providing to employees and past employees benefits in the nature of superannuation allowances on retirement, pensions to widows and widowers, and/or capital payments on death. Generally, the conditions of the enrolment, the amount of contribution (if any) and the benefits to be derived under the scheme will be set out in the trust deed. Such pension trusts will be subject to the general trust law. Any such pension trust fund may, although is not bound to, register under the Pension Trust Funds Act, This act provides that on registration the rule relating to perpetuities shall not apply and is deemed never to have applied to such a trust. Further, where a provision has been included in the trust deed of such a trust for the purpose only of avoiding the rule against perpetuities, the Registrar General may, on application by the trustees, make amendments to the trust deed deleting that provision. A registered pension trust fund is also entitled to apply for a tax exemption assurance protecting it from any tax which may in the future be enacted. A registered pension trust fund will be required to comply with certain matters set out in that act. Audited accounts must be prepared annually and filed with the Registrar General. Every five years the trustees are required to have a report prepared by an actuary, which must also be filed with the Registrar General. In addition, the rules of the pension trust fund must make provision for the matters set out in the schedule to that act. These include matters which are in any event usually contained within such a scheme. A copy of the rules must be available to any person having rights under the pension trust fund. Page 19 of 28

20 4. SHIPPING AND AIRCRAFT 4.1 Ownership of Ships The current legislation governing ship registration in Bermuda is the Merchant Shipping Act 2002, as amended by the Merchant Shipping Amendment Act 2004 (the Shipping Act ). The Shipping Act and Merchant Shipping (Registration of Ships) Regulations 2003 (the Regulations ) together form a comprehensive and modern shipping code which mirrors that of the United Kingdom. Bermuda companies are permitted to own ships registered in any jurisdiction throughout the world, provided always of course that such jurisdiction allows a Bermuda company to own ships registered on its register. Bermuda companies can also charter and operate ships of any flag. 4.2 Registration of Ships in Bermuda The Bermuda Register has been in existence since As a port of British registry Bermuda registered ships fly the red ensign undefaced. Bermuda has been classified as a Category 1 register and is thus capable of accepting for registration all types of vessels, with the exception of fishing vessels. As a member of the red ensign group Bermuda registered ships are entitled to British Consular representation and the protection of the Royal Navy. The administrative staff comprises the Registrar of Shipping (the Registrar ), an Assistant Registrar, a Chief Surveyor, a Senior Nautical Surveyor and two Senior Engineers and Ship Surveyors in Bermuda s capital, Hamilton. The following requirements must be met in order to register a ship in Bermuda: Application to Register An Application to Register must be made to the Registrar at the Department of Maritime Administration in the form prescribed in the Regulations. The Application Page 20 of 28

21 must contain the name and address of the applicant and sufficient information to enable the ship to be identified. Every Application must be accompanied by an instrument evidencing the appointment of a managing owner (where the ship is jointly owned) or a ship s manager, as the case may be Declaration of Eligibility The Application must be accompanied by a Declaration of Eligibility which is in prescribed form. The form includes a declaration of ownership which must be provided by each owner setting out his qualification to own a British ship. The form must also describe the ship s connection to Bermuda. The Declaration must also provide a breakdown of the legal ownership of the ship. Where the ship has already been registered on any other register, the Application must be accompanied by a certified extract from that register with respect to the ship. Where the ship is chartered in by demise, the Application must include a declaration by the registrar of the country of primary registration that the certificate of registration has been surrendered Corporate Ownership Where application to register is made on behalf of a body corporate, the Application must be accompanied by a certified copy of the company s certificate of incorporation, memorandum and articles of incorporation (or similar documents) and any certificate pertaining to any changes of name Approval of Name The Applicant is required to make a proposal for the name of the ship. The Registrar will generally approve a proposed name so long as the name is not already taken, or so similar to another name that it would cause confusion. In addition, the name must be in Roman numerals and must not be likely to be confused with a distress signal. Page 21 of 28

22 4.2.5 Evidence of Title The Application must be supported by evidence of title, in the form of the builder s certificate, or in the case of a ship which is not new, either a previous bill of sale showing ownership for at least 5 years before the Application is made or, if the ship has been registered with full registration at any time within the last 5 years, a bill of sale evidencing all transfer of ownership during the period so registered. The Registrar may accept other forms of evidence of title where necessary Survey A Certificate of Survey of final tonnage measurement, (incidental to registration in Bermuda), must be furnished to the Registrar to obtain a Certificate of Registration. In most cases, the survey will be arranged by the beneficial owners or attorneys for the owners abroad, and will be sent directly to the Registrar. Surveyors who are acceptable to the Registrar include the American Bureau of Shipping, Lloyd s Register of Shipping, Bureau Veritas, Det Norske Veritas, Germanischer Lloyd, and Registro Italiano Navale (RINA). If an application for a survey of tonnage measurement is to be made to the Registrar in Bermuda, the information to be provided must include the intended name of the vessel (yard and hull number if it is a new ship), gross tonnage and description, a location where the vessel may be surveyed, and confirmation of the party who is to be responsible for any costs involved Additional Inspection Requirements On receipt of the Application, if the Registrar is satisfied that all requirements are met, the Registrar will allocate an official number to the ship and will issue a carving and marking note. An inspector of marks will satisfy himself that the ship has been carved and marked in accordance with the Regulations. Page 22 of 28

23 4.3 Aircraft The policy of the Department of Civil Aviation is to avoid the Bermuda Register of Civil Aircraft being used as a flag of convenience and, therefore, applications are carefully scrutinized. The Department of Civil Aviation require an application for registration of an aircraft in the private category to be accompanied by the following documentation. It should be noted that registration in any other category will require the submission of additional documentation: Copies of certain corporate documents and records showing capacity and authority to own the aircraft; Evidence as to ownership of the Aircraft; A statement attesting that the aircraft is not on a similar register of any other state or territory and confirmation of deletion of the aircraft from its previous registry by direct communication from the country or state of such registry; Export Certificate of Airworthiness covering the export of the aircraft to Bermuda; Evidence that the aircraft is adequately insured; and Documents relating to the application for an aircraft radio licence. Details as to the aircraft radio licence and airworthiness requirements are available on request. It should be noted that there are requirements as to the expertise and approved license rating of the crew and pilot of the aircraft. 5. GENERAL 5.1 Taxes There is no Bermuda income or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable by exempted companies, permit companies or exempted partnerships ( exempted undertakings ) or by their Page 23 of 28

24 shareholders or partners, other than shareholders or partners ordinarily resident in Bermuda. Exempted undertakings can apply for and expect to receive from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act, 1966 an assurance that, in the event of there being enacted in Bermuda any legislation imposing tax computed on profits, income, or computed on any capital assets, gain or appreciation, or any tax in the nature of estate duty or inheritance tax, such tax shall not until 31st March, 2035 be applicable to such an exempted undertaking or to any of its operations, or the shares or debentures or other obligations of such exempted undertakings except insofar as such tax applies to persons ordinarily resident in Bermuda and holding such shares, debentures or other obligations of such an exempted undertaking or any land leased or let to such an exempted undertaking. 5.2 Registration Fees An exempted company is liable to pay to the Bermuda government an annual registration fee based upon its authorised and issued share capital. For a current listing of the fees, please contact Conyers Dill & Pearman. Provisions exist to convert a capital which is not denominated in Bermuda or US dollars for the purpose of determining the appropriate rate of registration fee. Essentially, the capital is converted at the rate of exchange applicable on the date the capital was fixed or last altered, as the case may be. Special provisions exist to protect minimum capital companies established with a capital denominated in a non dollar currency. An exempted partnership also pays an annual registration fee at a fixed rate. For the current fee, please contact Conyers Dill & Pearman. A permit company (that is, a company incorporated outside Bermuda but with a permit to carry on business in Bermuda) will pay a fixed registration fee based upon its business activity. Page 24 of 28

25 The registration fee is payable on establishment or formation of an exempted company, permit company or exempted partnership in Bermuda and thereafter, in the case of an exempted company and partnership in January of each year, and in the case of a permit company in March of each year. The initial fee on establishment is reduced by one half if the establishment occurs after 31st August in a particular year. Where the business activity of an exempted company or a permit company includes the management of any unit trust scheme, such company will pay an additional registration fee in respect of each unit trust managed. Exempted and permit companies carrying on insurance business will in addition to registration fees, pay licence fees, a listing of which can be obtained from Conyers Dill & Pearman. 5.3 Stamp Duties In general, there are no stamp duties or capital duties payable by an exempted company, permit company or exempted partnership. Further, no such duties are payable by any other person in a transaction involving the transfer of shares or interests of such companies or partnerships. Stamp duties may, however, be payable by such companies and partnerships (as well as by others) on dutiable transactions involving property in Bermuda. For a current listing of stamp duty rates payable on assets of a trust, please contact Conyers Dill & Pearman. 5.4 Miscellaneous Fees Further filing fees may be payable on the registration or filing of certain documents and forms in Bermuda. Page 25 of 28

26 Where an exempted undertaking employs staff or personnel in Bermuda a hospital levy and social insurance fees established on the basis of salary may be payable in respect of such employees. 5.5 Exchange Control Bermuda is independent for exchange control purposes which is operated under the Exchange Control Act 1972 and related regulations. The non resident designation allows these entities to operate free of exchange control regulations and enables them to make payments of dividends, to distribute capital, to hold, acquire and sell any currency and foreign securities without reference to the BMA. 5.6 Banking Several banks operate in Bermuda including HSBC (formerly the Bank of Bermuda Limited), The Bank of N. T. Butterfield and Son Limited and The Bermuda Commercial Bank Limited. Each of them has major correspondent banks throughout the world and some have representative offices and branches situated in important financial centres. These banks offer a comprehensive range of services including trustee, investment, custodian, letters of credit and foreign exchange facilities. 5.7 Accountants and Auditors General accounting and auditing facilities are available through professional firms of chartered accountants in Bermuda, many of which are associated with major international accounting firms. The major international accounting and auditing firms are represented in Bermuda. Under the Companies Act 1981, every exempted company must keep proper accounts of its assets and liabilities and business operations; and if such records are not kept in Bermuda on a current basis, there must be a record kept in Bermuda to enable the directors to ascertain the quarterly financial position of the company. Page 26 of 28

27 The Companies Act also requires every exempted company to have prepared audited financial statements and to make them available to its shareholders. This requirement may be waived if all the members and all the directors agree. 5.8 Work Permits A non Bermudian wishing to work in Bermuda must obtain a work permit from the Department of Labour and Immigration. The aim of Government policy is to ensure that suitably qualified Bermudians are employed if they are available. Normally, Bermuda law firms advise their clients on applications for work permits in conjunction with advice on the formation of companies or partnerships. Page 27 of 28

28 This publication should not be construed as legal advice and is not intended to be relied upon in relation to any specific matter. It deals in broad terms only and is intended merely to provide a brief overview and give general information. Conyers Dill & Pearman, June 2013 About Conyers Dill & Pearman Conyers Dill & Pearman is a leading international law firm advising on the laws of Bermuda, the British Virgin Islands, the Cayman Islands and Mauritius. Conyers has over 130 lawyers in eight offices worldwide and is affiliated with the Conyers Client Services group of companies which provide corporate administration, secretarial, trust and management services. Page 28 of 28